About Your Credit Score

Before lenders decide to lend you money, they need to know that you are willing and able to pay back that loan. To assess your ability to repay, they assess your income and debt ratio. To calculate your willingness to pay back the mortgage loan, they look at your credit score.

The most widely used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only consider the info contained in your credit profile. They don't take into account income, savings, amount of down payment, or factors like gender, race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was invented as a way to consider only what was relevant to a borrower's willingness to repay the lender.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score comes from the good and the bad in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.

Your credit report should contain at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This history ensures that there is sufficient information in your report to build an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply for a loan.

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